Bruce Whitfield interviews Conrad Wood, Head of Fixed Income at Aluwani Capital Partners.
The island nation of Sri Lanka is making headlines for all the wrong reasons.
Since the end of last year, the South Asian country’s 22 million people have suffered from shortages of essentials such as basic foodstuffs and fuel.
He effectively defaulted after being given a 30-day ultimatum to cover $78 million in unpaid interest.
South Africa is ranked 15th on Bloomberg’s Sovereign Debt Vulnerability Ranking, which provides an overview of countries likely to default on its debt obligations.
El Salvador tops the list, with the African nations of Ghana, Tunisia and Egypt also considered to be in serious financial difficulty.
Given the state of the global economy, the question must be asked, “Which other countries are at risk of suffering the same fate as Sri Lanka?” “Can the same thing happen to South Africa in 2022”?
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After Sri Lanka’s default, who is next on the list? The main financial ratios taken into account are 1) the yield on government bonds; 2) 5-year CDS spread; 3) Interest rate expenses; 4) Government debt. The aggregate value gives a ranking of sovereign debt vulnerability. Based on these ratios, pic.twitter.com/ivX3O8bfGD
— Jose Fuentes Ortega (@josefuenteso) July 10, 2022
What an upside down world we live in. It’s a world of economic and political volatility right now and when it all comes together it can be catastrophic as we have seen in Sri Lanka.
Conrad Wood, Head of Fixed Income at Aluwani Capital Partners
South Africa still features, unfortunately, in these vulnerability indices.
Conrad Wood, Head of Fixed Income at Aluwani Capital Partners
We are not that vulnerable from a debt service perspective when we go through periods of dollar strength. Certainly much less vulnerable than most other emerging markets.
Conrad Wood, Head of Fixed Income at Aluwani Capital Partners
The dollar is likely stronger against most emerging currencies over the past 6 months. So, effectively, your debt burden increases by 20%, simply because of currency movements.
Conrad Wood, Head of Fixed Income at Aluwani Capital Partners
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